Yelp (NYSE: YELP), an online site for discovering local businesses ranging from bars, restaurants, and cafes, to hairdressers, spas, and gas stations, is scheduled to report its fiscal first-quarter results on Thursday, May 9. We expect the stock to see little to no movement post the fiscal Q1 release with revenues and earnings matching expectations. In 2023, Yelp’s net revenue increased by 12% year-over-year (y-o-y) to a record $1.34 billion. Its net income nearly tripled y-o-y to $99 million and adjusted EBITDA grew 23% y-o-y to $330 million, delivering a strong 7% net income margin and a record 25% adjusted EBITDA margin. Yelp saw solid 2023 results but still the company’s stock is trading 13% lower since the beginning of this year. This is because Yelp expects both revenue and profit growth to decelerate in 2024. Yelp has guided 2024 full-year revenue to be in the range of $1.42 billion-$1.44 billion, up 7% from 2023, but worse than the consensus of $1.46 billion. It also expects adjusted EBITDA of $315 million-$335 million, the midpoint of which is slightly below the $330 million it reported in 2023. The company’s management noted investment in its services initiatives in the forecast.

However, the increase in YELP stock has been far from consistent. Returns for the stock were 11% in 2021, -25% in 2022, and 73% in 2023. In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 24% in 2023 – indicating that YELP underperformed the S&P in 2021 and 2022. In fact, consistently beating the S&P 500 – in good times and bad – has been difficult over recent years for individual stocks; for heavyweights in the Consumer Discretionary sector including AMZN, TSLA, and TM, and even for the megacap stars GOOG, MSFT, and AAPL. In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics. Given the current uncertain macroeconomic environment with high oil prices and elevated interest rates, could YELP face a similar situation as it did in 2021 and 2022 and underperform the S&P over the next 12 months – or will it see a strong jump?

Our forecast indicates that Yelp’s valuation is around $40 a share, which is about in line with the current market price. Look at our interactive dashboard analysis on Yelp’s Earnings Preview: What To Expect in Fiscal Q1? for more details.

(1) Revenues expected to come in line with consensus estimates

Trefis estimates Yelp’s Q1 2024 revenues to be around $334 Mil, in line with the consensus estimate. In Q4, Yelp generated net revenue of $342 million, up 11% year over year (y-o-y), driven by an increase in average revenue per location. Yelp’s growth in 2023 was broad-based, with the help of categories like home services and self-serve ads. The company’s full-year 2023 ad clicks grew 5% y-o-y and its ad monetization saw improvement – meaning it made more per click. Its average cost per click was up 9% y-o-y in 2023. Yelp has significant exposure to the restaurant industry, which explains a 10% growth to record $483 million in its advertising revenue (in 2023) despite inflationary pressures. We forecast Yelp’s Revenues to be $1.5 billion for the fiscal year 2024, up 11% y-o-y. We continue to believe that the company stands to benefit from its shift from local businesses and restaurants to multi-location advertiser strength and an uptrend in cost-per-click (CPC) rates in the upcoming quarter as well.

2) EPS likely to match the consensus estimates

Yelp’s Q1 2024 earnings per share (EPS) is expected to come in at 6 cents per Trefis analysis, matching the consensus estimate. The company saw solid growth on the bottom line as adjusted EBITDA rose 20% y-o-y to $96.1 million in Q4, and the company reported a GAAP profit per share of $0.37 in Q4 2023, up from $0.28 in the quarter a year ago. Also, in the fourth quarter, Yelp repurchased approximately 1.1 million shares at an aggregate cost of $50 million, returning a total of $200 million to shareholders during the full year of 2023.

(3) Stock price estimate aligns with the current market price

Going by our Yelp’s Valuation, we estimate earnings per share to come at $1.51 and a P/E multiple of 26.4x in fiscal 2024, translating into a price of around $40, which aligns with the current market price.

It is helpful to see how its peers stack up. YELP Peers shows how Yelp compares against peers on metrics that matter. You will find other useful comparisons for companies across industries at Peer Comparisons.

[1] Returns as of 5/7/2024
[2] Cumulative total returns since the end of 2016

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.